Canada turns protectionist

Oct 25, 2012

Share with
friends:

Comments (0) Print this article

The Canadian government surprised investors last weekend. It blocked the $5.2bn acquisition of local gas producer Progress Energy by Malaysia’s Petronas. Industry minister Christian Paradis said, without elaborating, that the bid did not meet the government’s net-benefit test for foreign investments. Petronas has 30 days to improve its offer.

The Petronas tie-up is the latest of several high-profile bids vetoed by the government over the past few years. The move has fuelled speculation that a pending $15bn bid by China’s oil major CNOOC for Canada’s Nexen could also be blocked.

What the commentators said

“Canada, it appears, is no longer quite so open for business,” said Robert Cyran on Breakingviews. The apparent list of industries “worthy of protection has become incredibly expansive”. And protectionism “has crept with French-like stealth into sectors hardly in the realm of national economic security”, such as home improvement.

America’s Lowe’s was stopped from buying a struggling Canadian counterpart. That followed a thwarted bid for the Toronto Stock Exchange and fertiliser giant Potash.

As far as the energy sector is concerned, protecting strategic resources is all very well, said Martin Pelletier of TriVest Wealth Counsel, but it must be balanced “with the need for capital to develop those resources”. Canada’s capital markets are relatively small, so it relies heavily on foreign investment to exploit its hydrocarbons. A government estimate of the money needed over the next decade came to C$650bn.

The Petronas veto suggests the government may object to investment from state-controlled firms, said the FT. But then Canada would be shut off from “the rising powers in global energy”. It’s just as well, then, that the government has undertaken to issue a new policy framework. The only way to reassure investors that Canada welcomes foreign firms “is to clarify the rules in a transparent manner as quickly as possible”.

Comments (0)

Share with
friends:

Related articles

Leave a comment

This will be the name displayed with your comment.

This helps us verify comments are genuine. It will not be displayed anywhere on the site and is stored confidentially.

Please keep your comment within 1,000 characters and relevant to the main topic. We encourage healthy debate, but we don't allow insults or bad language. Anything off topic or unpleasant, we'll remove. Enjoy the conversation! Thank you.

captcha To prevent spam-related comments please enter the characters shown in the 'Captcha' box to the left.

By leaving a comment you accept our terms and conditions.


FREE - MoneyWeek's daily investment emailJohn Stepek

Our free daily email, Money Morning, is an informative and enjoyable analysis of what's going on in the markets. Written by our Editor, John Stepek, and guest contributors.
Sign up FREE to Money Morning here.

>